white paper
The 90’s have been a time of
unprecedented organizational thrashing. Holding companies are divesting. Focused companies
are merging. Waves of layoffs are followed within months by hiring as sales turn around.
Management is restructured, and then the reorganization is reorganized.
Executive leadership has been looking for the “silver bullet.” It began with the
“search for excellence.” Next were programs such as TQM or reengineering that
have been adopted with zeal, then left to fizzle with a “this too shall pass”
attitude from staff.
Yet organizations are improving their operational efficiency, increasing their focus on
customers, and becoming more lean and targeted on business results. Management has done
this by experimenting with a variety of tactics, using a combination of the latest
buzzword tools: right-sizing, outsourcing, continuous quality improvement, process
reengineering and human resources development.
These mid-morph organizations are in the midst of dramatic changes, but moving towards
what target? The structure required for Y2K and beyond requires an unprecedented
flexibility, demands retention of critical core talent, and must provide unparalleled
competitive efficiencies.
The organization of today and tomorrow must be structured based upon a new definition of
“core competencies.” It will be able to "accordion" up and down as
business volumes demand. It will employ different categories of workers with vastly
different needs, and with very different management requirements. It will be a “3rd
Millennium Organization.”
the classic hierarchy structure
No matter how much advanced structural thinking has
taken place, most organizations are little different in design than the Roman army or a
19th century railroad. Many of the leaders who designed today’s businesses came out
of the military hierarchy of World War II. The result is a readily-drawn organizational
chart showing the reporting hierarchy with well-defined responsibilities at each level.
In this organization, it is easy to expand or
contract. Need another sales region? Add an office, a regional V.P., duplicate the staff
and populate the territories as needed. Communications is not so convenient, traveling
slowly up and down the hierarchy and moving laterally only when paths join at higher
levels. Customer service also suffers, since often no one “owns” an entire
process.
continuous quality improvement
Foreign competitors have shown how powerful decades of
continuous quality improvement can be. The TQM philosophy of “do it right the first
time, every time” makes certain that processes work the way they were designed.
Leading U.S. companies took this to new heights with a Six Sigma approach focusing on
increasing customer satisfaction, reducing cycle time and minimizing error rates.
A limitation of the quality movement is the dependence upon existing processes. For
example, ISO 9000 audits certify that essential processes are in place and working, not
that the processes are particularly efficient.
Company 2
Company 1
Consequently, programs such as Baldrige have increased the emphasis on improving
business results. Still, start with a poor structure and outdated processes like Company 1
above, and the continuous improvement approach will have difficulty catching up with
Company 2 starting later and with vastly better processes.
downsizing
Many companies have given up trying to radically
improve processes from the top down. Instead of changing processes and then adjusting
staff to fit, management has simply lays off a percentage of the workforce and figures
that processes will have to change by fiat. The unimportant will quit getting done because
there is no time or no one to do it.
There is a price for this “easy way out.” Many non-essential tasks are
eliminated, but so are many important tasks. Plus, the incentive approach to downsizing is
a classic Dilbert joke, “Let’s actually pay our most experienced people to
leave.”
These organizations have suffered through a reverse selection process where many of their
most talented employees take the money and run to a new career ... or to a competitor. The
XX% of people downsized contains far too many employees that organization didn’t want
to lose. And many of those remaining are the ones that wouldn’t be competitive on the
open job market, the non-risk takers.
reengineering
For awhile it appeared that the solution was to change
the way processes were redesigned. Management took a lesson from startups and late
competitive entries who had no historical structural baggage to undo, who could organize
themselves properly from the beginning. Organizations could produce dramatic, radical,
major changes in efficiencies and services with reengineering. Unfortunately, these
radical process changes were also catastrophic.
Reengineering has proven very difficult to accomplish. Personnel, especially middle
management, is an impediment. Organizations have to redesign critical processes and
systems from the ground up, then transition from the old system to the reengineered one.
The sheer weight and complexity of this effort generates mixed results. Some organizations
have achieved enormous gains. Others have spent millions of dollars and failed.
what’s needed
All of the above approaches to organizational structure
and process improvement have value. Each is being used today to drive business results.
Yet none alone provides organizations with a complete solution for driving change beyond
Y2K.
A 3rd Millennium structure must do the following:
 Allow
organizations to rightsize up and down quickly
Retain
critical employees
Focus on
core business issues
Reengineer
processes by replacing them completely
Leverage
efficiencies of the competencies of others
It begins by identifying “core functions.”
solution: identifying core functions
Organizations must identify those activities that are
core functions vs. those that have potential for handling with something other than
permanent, full-time employees. For example, a large consumer beverage firm laid off 10
percent of its workforce across the board – about 1,000 people. It lost a large
number of talented people, employees who were critical to the success of the firm, who
took the buyout and moved on to the next career.
The critical question is: “Which departments (or employees) really need to understand
our business?” In the example above, non-core departments might include:
shipping/receiving, security, the mail room, auditing, printing/graphics, building
maintenance, much of MIS, human resources, purchasing, engineering, legal and more.
Core departments might be: sales, product marketing, wholesaler operations, strategic
planning, advertising, public relations, etc. Assuming the right people are in place,
these are essential workgroups that have the specialized, hard to develop or duplicate
knowledge and skills critical to the success of the organization. These are a permanent
part of the organization separate from the ebb and flow of business requirements.
solution: a new structure for the 3rd
millennium
Many organizations are implementing elements of this
strategy, but few have taken it to its ultimate conclusion. This is far more than
selective outsourcing or temporary employees in ones and twos. It is a complete
fundamental shift in looking at an organization’s permanent components.
The easiest and least expensive way to
reengineer processes is to have someone else do them – preferable someone with
economies of scale and additional expertise in the non-core area. The fastest and least
expensive way to rightsize is to make it a vendor responsibility, where the partner can
readily redeploy excess workers to other contracts.
In the consumer beverage firm example above, about 2,000 headquarters employees were
estimated to work in core departments. The remaining 8,000 employees are all potential
candidates for an alternative form of employment.
The single characteristic for this alternative employment is flexibility. The organization
must be able to easily rightsize itself and quickly take advantage of new processes or the
efficiencies of specialists. It is likely a combination of many alternative employment
strategies ... employee leasing, temporary employees, part-time employees, contractors,
job sharing and so on.
These new employee types create a host of challenges to management. There are now several
classes of employees working in an organization, all having effects on internal and
external customers. How are they acquired and released? Where are their loyalties? How
will they be indoctrinated into the culture and procedures of the organization? What is
the orientation process? How are they assigned work, managed and reviewed? What is the
performance remediation process? All this requires very different procedures relative to
permanent, core employees.
solution: a new management function
Managing this new structure of a 3rd Millennium
organization is a full-time job. Researchers are now talking about a new executive level
position, the Chief Resource Officer (CRO). The CRO’s role is to consolidate the
management of the new employee and vendor relationships that are distributed throughout
the organization.
The Office of the CRO (or its functional equivalent in an existing department) contains
the specialized skills and knowledge required to avoid the cost and performance problems
organizations have encountered from improperly managed relationships. It centralizes and
professionalizes the management of alternative resources.
For example, one organization found it was utilizing over 50 printing firms across all its
headquarters departments. Significant service and cost savings were obtained by
consolidating to several printers. Another firm realized it had made a mistake by letting
the MIS department manage an outsourcing contract. The technology professionals were not
skilled in contract negotiating and fulfillment.
The CRO function handles unique issues such as core/non-core determinations, vendor
research and selection, alternative employee orientation, and vendor partner performance
measurement and management. It makes these decisions as part of a coherent strategy for
utilizing the best possible processes with the right number of people.
This is how the 3rd Millennium organization will remain nimble and cost effective in Y2K
and beyond.
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